What are the risks of selling property on your own?

A property owner has the option to sell their property independently or with the assistance of a broker or a brokerage firm. Both approaches come with their own set of advantages and disadvantages. The most significant benefit of selling on your own is the elimination of commission fees, which can save you money on the transaction. However, there are several risks involved that potential sellers should be aware of.

Advantages of selling property on your own

• No commission fees: The most notable advantage is that you don’t have to pay commission fees to a broker or agent, meaning you can retain the full sale price.
• Complete control over the process: Selling the property on your own means you have full control over every aspect of the sale, including setting the price, scheduling showings, and negotiating directly with buyers. This eliminates the middleman and ensures you hold onto the full sale price.
• Direct communication with buyers: By dealing directly with potential buyers, you have the freedom to market the property in a way that best highlights its features. This direct connection can speed up the buyer’s decision-making process.
• Maximising profit margins: Without intermediaries, you can maximise your profit margin by retaining the entire sale price of the property.

While these advantages make selling independently appealing, it is essential to be aware of the risks involved. In this guide, we detail the key risks a property owner might face when deciding to sell their property on their own.

Risks of selling property on your own

1. Negotiation challenges

Many property owners are emotionally attached to the homes they’re selling, which can hinder their ability to negotiate effectively. Buyers often expect lower prices when there is no agent involved, which can further weaken the seller’s position in negotiations.

2. Limited exposure in the market

Real estate agents have access to extensive networks and marketing channels, which an independent seller may lack. As a result, the property may not be exposed to as many potential buyers, ultimately impacting the time it takes to sell.

3. Complex legal issues

Property sales involve a substantial amount of legal documentation and procedures that must be followed to ensure the sale is valid and legally binding. Without a real estate agent, sellers may not be familiar with the legal requirements, leading to delays and potential financial loss.

4. Setting the right price

One of the most challenging aspects of selling a property on your own is setting the correct price for the property. If the seller underprices it, he may incur a financial loss. On the other hand, overpricing it could result in the property sitting on the market for months. A property that remains unsold for an extended period is often perceived as less desirable, which can hurt its future sale price.

5. Request for original property documents

A seller may be asked to provide the original property documents before the sale deed is signed. However, this is a risky move, as handing over original documents without receiving payment could lead to potential fraud. Even if the buyer claims they need the documents for loan purposes, the seller should not release them until the money is in hand and the sale deed is signed.

6. Sale agreement expiry

Sometimes, a sale agreement may lack a specified expiration date, giving buyers an opportunity to delay the purchase. This extended delay can financially affect the seller, as the property will remain unavailable for sale until the transaction is finalized. To avoid this, a seller should ensure that the agreement includes a clear deadline (typically within 30-45 days) for signing the sale deed.

7. Pending payment after executing sale deed

In some cases, buyers may request to pay the balance amount after the sale deed is executed. However, once the deed is signed, they may not fulfill their payment obligations. To protect themselves, sellers should include a clause in the sale agreement stating that the deal will be null and void if the buyer does not complete the payment within a specific time frame. Trusting verbal agreements alone can be risky—ensure a formal agreement is signed before proceeding with the sale deed.

8. Time commitment

Selling a property on your own requires significant time investment, including marketing, staging the home, and managing documentation. If the seller is pressed for time, he may skip essential steps or rush through them, which could result in a lower sale price or other financial drawbacks.

9. TDS and tax implications

Under Section 194, when a property is sold, the buyer must deduct Tax Deducted at Source (TDS) from the sale amount. In the case of a non-resident Indian (NRI) seller, TDS is deducted under Section 195. The buyer must deposit the deducted amount by the 7th of the following month. Sellers should ensure that the buyer deposits the TDS on time, as it can be adjusted against the seller’s capital gains tax or refunded, depending on the situation.

Housing.com POV

Selling property independently carries several financial risks. It is crucial for the seller to stay informed about market conditions and be aware of the potential risks outlined above. When negotiating and finalising the sale, ensure that the sale agreement includes protective clauses for the seller’s rights. If taking token money from the buyer, consider notarizing the transaction to safeguard your interests. If at any point you feel uncertain, it may be worth reconsidering paying a commission and using a broker’s services to facilitate a smoother sale process.

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